1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------------------------------
(3) Filing party:
------------------------------------------------------------------------
(4) Date filed:
------------------------------------------------------------------------
2
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of ROYAL
BANCSHARES OF PENNSYLVANIA, INC. will be held at the Radisson Twelve Caesars
hotel and banquet facility, 4200 City Line Avenue, Philadelphia, Pennsylvania,
19131 on Wednesday, May 16, 2001, at 6:30 p.m., for the following purposes:
1. ELECTION OF DIRECTORS. To elect five Class II Directors to serve a
term of three years and until their successors are elected and qualified.
2. EMPLOYEES' STOCK OPTION AND APPRECIATION RIGHTS PLAN. To reserve
500,000 shares of corporation common stock for issuance under the Employees'
Stock Option and Appreciation Rights Plan.
3. DIRECTORS' STOCK OPTION PLAN. To reserve 100,000 shares of
corporation common stock for issuance under the Directors' Stock Option Plan.
4. OTHER BUSINESS. To consider such other business as may properly be
brought before the meeting and any adjournment or postponement thereof.
Only shareholders of record at the close of business on March 26, 2001,
are entitled to notice of and to vote at the meeting.
We enclose a copy of the 2000 Annual Report of Royal Bancshares of
Pennsylvania, Inc. Additional copies of the 2000 Annual Report are available
upon request.
By Order of the Board of Directors
/s/ RICHARD S. HANNYE
Richard S. Hannye, Esquire
Secretary
Enclosures (Proxy Card and Annual Report)
April 24, 2001
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU DO ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON AFTER GIVING WRITTEN
NOTICE TO THE SECRETARY OF THE CORPORATION.
3
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
732 MONTGOMERY AVENUE
NARBERTH, PENNSYLVANIA 19072
----------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 2001
----------------
We furnish this proxy statement in connection with the solicitation of
proxies by the Board of Directors of Royal Bancshares of Pennsylvania, Inc., for
the Annual Meeting of Shareholders of the corporation to be held on May 16,
2001, and any adjournment or postponement of the meeting. The corporation will
bear the expense of soliciting proxies. In addition to the use of the mails,
directors, officers and employees of the corporation may, without additional
compensation, solicit proxies personally or by telephone. Arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries to
forward proxy solicitation material to the beneficial owners of stock held of
record by these persons and, upon request therefor, the corporation will
reimburse them for their reasonable expenses. This proxy statement and the
enclosed proxy card are first being given or sent to shareholders on or about
April 24, 2001.
REVOCATION AND VOTING OF PROXIES
The execution and return of the enclosed proxy will not affect a
shareholder's right to attend the meeting and to vote in person. You may revoke
any proxy given pursuant to this solicitation by delivering written notice of
revocation to Richard S. Hannye, Esquire, Secretary of the corporation, at the
address that appears above, at any time before the proxy is voted at the
meeting. Unless revoked, the proxyholders will vote any proxy given pursuant to
this solicitation at the meeting in accordance with the instructions of the
shareholder giving the proxy. In the absence of instructions, proxyholders will
vote all proxies FOR the election of the five nominees for Class II Director
identified in this proxy statement. Although the Board of Directors knows of no
other business to be presented, in the event that any other matters are brought
before the meeting, proxyholders will vote any proxy given pursuant to this
solicitation in accordance with the recommendations of the management of the
corporation.
VOTING SECURITIES, RECORD DATE AND QUORUM
Shareholders of record at the close of business on March 26, 2001, are
entitled to vote at the meeting and any adjournment or postponement thereof. At
the close of business on March 26, 2001, there were issued and outstanding
8,583,490 shares of Class A common stock ($2.00 par value per share) and
1,817,329 shares of Class B common stock ($0.10 par value per share).
Each shareholder is entitled to one vote for each share of Class A
common stock held by the shareholder and ten votes for each share of Class B
common stock held by the shareholder on all matters
2
4
to be acted upon at the meeting, except that in the election of directors
shareholders are entitled to vote shares cumulatively. See "ELECTION OF
DIRECTORS--CUMULATIVE VOTING."
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares entitled to vote constitutes a quorum for the conduct of
business. A majority of the votes cast at a meeting at which a quorum is present
is required in order to approve any matter submitted to a vote of the
shareholders, except in cases where the vote of a greater number of votes is
required by law or under the Articles of Incorporation or Bylaws of the
corporation. Votes withheld and abstentions will be counted in determining the
presence of a quorum for the particular matter. Broker non-votes will not be
counted in determining the presence of a quorum for the particular matter as to
which the broker withheld authority.
In the case of the election of directors, assuming the presence of a
quorum, the five candidates for Class II receiving the highest number of votes
in Class II shall be elected to the Board of Directors. Votes withheld from a
nominee and broker non-votes will not be cast for the nominee.
PRINCIPAL SHAREHOLDERS
The following table shows the amount of outstanding common stock
beneficially owned by each shareholder (including any "group" as the term is
used in Section 3(d)(3) of the Securities Exchange Act of 1934) known by the
corporation to be the beneficial owner of more than 5% of such stock, and all
directors and officers as a group. Each share of Class A common stock is
entitled to one vote per share. Each share of Class B common stock is entitled
to ten votes per share and may be converted into shares of Class A common stock
at the current rate of 1.15 shares of Class A common stock for each share of
Class B common stock. Beneficial ownership is determined in accordance with
applicable regulations of the SEC and the information is not necessarily
indicative of beneficial ownership for any other purpose. For purposes of the
table set forth below, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and any shares
that the individual has the right to acquire within 60 days of February 28,
2001. In addition, a person is deemed to beneficially own any stock for which
he, directly or indirectly, through any contact, arrangement, understanding,
relationship or otherwise has or shares:
- Voting power, which includes the power to vote or to direct the
voting of the stock, or
- Investment power, which includes the power to dispose or to
direct the disposition of the stock.
Unless otherwise indicated in a footnote, shares reported in this table are
owned directly by the reporting person. The percent of class assumes all options
exercisable within 60 days of February 28, 2001, have been exercised and,
therefore, on a pro forma basis, 8,922,894 shares of Class A common stock would
be outstanding. The information is furnished as of February 28, 2001, on which
date 8,583,490 Class A shares and 1,817,329 Class B shares were issued and
outstanding.
3
5
NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS(6)
---------------- ----- --------
Daniel M. Tabas (1)(4)(5) 4,448,100(Class A) 50.99%
543 Mulberry Lane 1,319,927(Class B) 72.63%
Haverford, PA 19041
Lee E. Tabas (2)(4)(5) 719,121(Class A) 8.38%
1 Dove Lane 123,009 (Class B) 6.77%
Haverford, PA 19041
Richard Tabas (3)(5) 64(Class A) 0.00%
1309 Lafayette Road 129,537(Class B) 7.13%
Gladwyne, PA 19035
ALL DIRECTORS AND EXECUTIVE 5,345,897(CLASS A) 59.91%
OFFICERS AS A GROUP 1,549,923(CLASS B) 85.29%
(15 PERSONS)
(1) The 4,448,100 shares of Class A common stock and the 1,319,927 shares of
Class B common stock beneficially owned by Daniel M. Tabas include: 2,726,336
shares of Class A common stock and 889,713 shares of Class B common stock held
jointly with his wife, Evelyn R. Tabas; 69,780 shares of Class A common stock
and 31,557 shares of Class B common stock owned by Rome Enterprises, a
partnership controlled by Mr. Tabas; 1,227,573 shares of Class A common stock
and 398,657 shares of Class B common stock owned by the children of Mr. Tabas;
285,173 shares of Class A common stock controlled by Evelyn R. Tabas as
custodian for her grandchildren; and options to purchase 139,238 shares of Class
A common stock that are exercisable within 60 days of February 28, 2001. Mr.
Tabas shares power with Evelyn R. Tabas to vote and dispose of 4,448,100 shares
of Class A common stock and 1,319,927 shares of Class B common stock. In
calculating the tabulated percent of class, the options to purchase 139,238
shares of Class A common stock were added to the shares of Class A common stock
currently held by Mr. Tabas and to the total number of shares of Class A common
stock outstanding assuming all options exercisable within 60 days of February
28, 2001, held by Mr. Tabas, were exercised.
(2) The 719,121 shares of Class A common stock and 123,009 shares of Class B
common stock beneficially owned by Lee E. Tabas include: 321,364 shares of Class
A common stock owned jointly with his wife, Nancy Tabas;4,229 shares of Class A
common stock and 48,402 shares of Class B common stock owned by his wife, Nancy
Tabas; 33,667 shares of Class A common stock and 4,857 shares of Class B common
stock owned by Mr. Tabas as custodian for his children. Mr. Tabas has sole power
to vote and dispose of 355,031 shares of Class A common stock and 4,857 shares
of Class B common stock. In addition, 358,286 shares of Class A common stock and
69,750 shares of Class B common stock are included under the beneficial
ownership of Daniel M. Tabas described in footnote 1 above. These shares of
common stock are held in trusts under which Daniel M. Tabas retains voting
control.
(3) The 64 shares of Class A common stock and 129,537 shares of Class B common
stock beneficially owned by Richard Tabas include: 88,569 shares of Class B
common stock owned solely by Mr. Tabas; 14,388 shares of Class B common stock
owned by his mother, Harriette Tabas; 64 shares of Class A common stock and 195
shares of Class B common stock owned by his wife, Leslie Silverman, Esquire; and
24,422 shares of Class B common stock owned by ANR Ventures, an entity partially
controlled by Mr. Tabas. Upon information and belief, Mr. Tabas has sole power
to vote and dispose of 88,569 shares of Class B common stock, shared power to
vote or dispose of 24,422 shares of Class B common stock, and has no power to
vote or dispose of 64 shares of Class A common stock and 16,546 shares of Class
B common stock.
(4) Daniel M. Tabas, Lee E. Tabas, Robert R. Tabas, Murray Stempel, Howard
Wurzak, members of their immediate families and their affiliates and associates,
in the aggregate, own 5,087,556 shares of Class A common stock and 1,378,530
shares of Class B common stock.
(5) Daniel M. Tabas is the father of Lee E. Tabas and Robert R. Tabas, the uncle
of Richard Tabas, and the father in law of Murray Stempel and Howard Wurzak.
ELECTION OF DIRECTORS
The Bylaws of the corporation provide that the Board of Directors
consist of not less than 5 nor more than 25 persons and that the directors are
classified with respect to the time they hold office by dividing them into 3
classes, as nearly equal in number as possible. The Bylaws further provide that
the directors of each class are elected for a 3 year term, so that the term of
office of one class of directors
4
6
expires at the annual meeting each year. The Bylaws also provide that the
aggregate number of directors and the number of directors in each class of
directors is determined by the Board of Directors. Any vacancy occurring on the
Board of Directors is filled by appointment by the remaining directors. Any
director who is appointed to fill a vacancy holds office until the expiration of
the term of office of the class of directors to which he or she was appointed.
There are presently 14 members of the Board of Directors. At the March
21, 2001, meeting of the corporation's Board of Director's, in accordance with
Article 10 of the corporation's Bylaws, the directors fixed the number of
directors in Class I at 5, the number of directors in Class II at 5 and the
number of directors in Class III at 4.
The Board of Directors has nominated the following 5 persons for
election to the Board of Directors as Class II Directors for a term of 3 years:
Jack Loew Gregory Reardon
Anthony Micale Robert R. Tabas
Albert Ominsky
The Board of Directors has established, by resolution, a mandatory
retirement age for directors. Upon reaching age seventy, a director must retire
from the Board of Directors, but may become a Director Emeritus, who is entitled
to attend meetings, but is not entitled to vote. There are currently six
Directors Emeritus of the corporation: Anthony Arobone, Royal Flagg Jonas,
Alfred Stein, Charles Willner, Frank Grossman and Maurice Tepper. Daniel M.
Tabas reached age seventy during 1993; however, the Board of Directors decided,
in view of his long-standing relationship with the corporation, ownership of
shares of the corporation's common stock and his years of service to the
corporation, to make an exception and permit Mr. Tabas to continue to serve on
the Board of Directors.
CUMULATIVE VOTING
In the election of directors, every shareholder entitled to vote has the
right, in person or by proxy, to multiply the number of votes to which he may be
entitled by the number of directors in the class to be elected at the annual
meeting. Every shareholder may cast his or her whole number of votes for one
candidate or may distribute them among any 2 or more candidates in that class.
The 5 candidates receiving the highest number of votes for Class II at the
meeting will be elected. There are no conditions precedent to the exercise of
cumulative voting rights. Joseph P. Campbell and Richard S. Hannye, the persons
named as proxies, have the right to vote cumulatively and to distribute their
votes among the nominees as they consider advisable, unless a shareholder
indicates on his or her Proxy how votes are to be cumulated for voting purposes.
5
7
INFORMATION ABOUT NOMINEES, CONTINUING DIRECTORS
AND EXECUTIVE OFFICERS
Information concerning the directors of the corporation, including the 5
persons nominated for election to the Board of Directors as Class II Directors
at the meeting, the 9 continuing directors and the executive officers of the
corporation, is set forth below, including the number of shares of common stock
of the corporation beneficially owned, as of February 28, 2001, by each of them.
Unless otherwise indicated in a footnote, each nominee and continuing director
holds sole voting and investment power with respect to shares beneficially
owned.
DIRECTOR SHARES PERCENT
OR OFFICER BENEFICIALLY OF
NAME AGE SINCE OWNED STOCK
----------------------- ----- ----------- ------------- -----------------
CLASS I DIRECTORS
- -----------------
Daniel M. Tabas (3)(5) 77 1980 4,448,100(A) 55.18%
1,319,927(B)
Joseph P. Campbell 54 1982 113,128(A) 1.06%
Howard Wurzak(4)(5) 45 1985 267,509(A) 3.18%
62,746(B)
Murray Stempel, III(5)(7) 45 1996 253,076(A) 3.10%
68,156(B)
James J. McSwiggan 45 1992 33,026(A) 0.31%
NOMINEES FOR CLASS II DIRECTORS
- -------------------------------
Albert Ominsky(2) 67 1982 28,397(A) 0.60%
31,356(B)
Robert R. Tabas(5)(6) 45 1988 236,944(A) 2.94%
67,961(B)
Anthony J. Micale 63 1997 6,751(A) 0.06%
Gregory T. Reardon 47 1997 5,507(A) 0.05%
Jack R. Loew 53 1997 12,480(A) 0.12%
6
8
CLASS III DIRECTORS
- -------------------
Lee E. Tabas (1)(5) 51 1980 719,121(A) 8.06%
123,009(B)
Edward B. Tepper 61 1986 19,782(A) 0.30%
10,500(B)
Carl M. Cousins 68 1993 14,641(A) 0.14%
John M. Decker 40 1988 26,359(A) 0.25%
NON-DIRECTOR EXECUTIVE OFFICERS
- -------------------------------
Richard S. Hannye 43 1993 8,230(A) 0.08%
Secretary and General
Counsel
The information in this table was furnished by the beneficial owners or their
representatives and includes direct and indirect ownership.
We assume full conversion of Class B common stock to Class A common stock at the
current conversion factor of 1.15 shares of Class A common stock for each share
of Class B common stock. In calculating the tabulated percent of class for each
officer and director who has exercisable stock options, the additional shares of
Class A common stock to which the officer and director would be entitled upon
the exercise of his options were added to the shares of Class A common stock
currently held by the officer and director and to the total number of shares of
Class A common stock outstanding assuming the officer and directors exercised
all outstanding exercisable options.
The table includes options exercisable within 60 days of February 28, 2001,
stock options unexercised, but currently exercisable, and stock beneficially
owned.
The percent of class assumes all outstanding exercisable options and options
exercisable within 60 days of February 28, 2001, issued to directors and
officers, have been exercised and therefore, on a pro forma basis, 8,922,894
shares of Class A common stock would be outstanding at February 28, 2001.
(1)The 719,121 shares of Class A common stock and 123,009 shares of Class B
common stock beneficially owned by Lee E. Tabas include: 321,364 shares of Class
A common stock owned jointly with his wife, Nancy Tabas; 4,229 shares of Class A
common stock and 48,402 shares of Class B common stock owned by his wife, Nancy
Tabas; 33,667 shares of Class A common stock and 4,857 shares of Class B common
stock owned by Mr. Tabas as custodian for his children. Mr. Tabas has sole power
to vote and dispose of 355,031 shares of Class A common stock and 4,857 shares
of Class B common stock. In addition, 358,286 shares of Class A common stock and
69,750 shares of Class B common stock are included under the beneficial
ownership of Daniel M. Tabas described in footnote 3 below. These shares of
common stock are held in trusts under which Daniel M. Tabas retains voting
control.
(2) The 28,397 shares of Class A common stock and 31,356 shares of Class B
common stock beneficially owned by Mr. Ominsky include: 11,377 shares of Class A
common stock and 31,356 shares of Class B common stock owned by Ominsky &
Ominsky, P.C. as trustee for a rollover account for the benefit of Albert
Ominsky; 5,011 shares of Class A common stock owned by the Ominsky & Ominsky,
P.C. Profit Sharing Plan; and options to purchase 12,009 shares of Class A
common stock exercisable within 60 days of February 28, 2001.
(3)The 4,448,100 shares of Class A common stock and the 1,319,927 Class B shares
beneficially owned by Daniel M. Tabas include: 2,726,336 shares of Class A
common stock and 889,713 shares of Class B common stock held jointly with his
wife, Evelyn R. Tabas; 69,780 shares of Class A common stock and 31,557 shares
of Class B common stock owned by Rome Enterprises, a partnership controlled by
Mr. Tabas; 1,227,573 shares of Class A common stock and 398,657 shares of Class
B common stock owned by the children of Mr. Tabas; 285,173 shares of Class A
common stock controlled by Evelyn R. Tabas as custodian for her grandchildren;
and options to purchase 139,238 shares of Class A common stock that are
exercisable within 60 days of February 28, 2001. Mr. Tabas shares power with
Evelyn R. Tabas to vote and dispose of 4,448,100 shares of Class A common stock
and 1,319,927 shares of Class B common stock. In calculating the tabulated
percent of class, the options to purchase 139,238 shares of Class A common stock
were added to the shares of Class A common stock currently held by Mr. Tabas and
to the total number of shares of Class A common stock outstanding assuming all
options exercisable within 60 days of February 28, 2001, held by Mr. Tabas, were
exercised.
(4) Included in Howard Wurzak's beneficial ownership are 255,499 shares of Class
A common stock and 62,746 shares of Class B common stock which are included in
the beneficial ownership of Daniel M. Tabas described in footnote 3 above. These
shares of common stock are held in trusts under which Daniel M. Tabas retains
voting control.
(5) Daniel M. Tabas, Lee E. Tabas, Robert R. Tabas, Murray Stempel, Howard
Wurzak and members of their immediate families and their affiliates and
associates, in the aggregate, own 5,087,556 shares of Class A common stock
(57.93 % of Class A) and 1,378,530 shares of Class B common stock (75.85% of
Class B), or 59.54 of Class A assuming full conversion of Class B common stock
to Class A common stock at a current conversion factor of 1.15 shares of Class A
common stock for each share of Class B common stock.
7
9
(6) Included in Robert R. Tabas's beneficial ownership are 176,960 shares of
Class A common stock and 62,617 shares of Class B common stock which are
included in the beneficial ownership of Daniel M. Tabas described in footnote 3
above. These shares of common stock are held in trusts under which Daniel M.
Tabas retains voting control.
(7) Included in Murray Stempel, III's beneficial ownership are 245,576 shares of
Class A common stock and 68,156 shares of Class B common stock which are
included in the beneficial ownership of Daniel M. Tabas described in footnote 3
above. These shares of common stock are held in trusts under which Daniel M.
Tabas retains voting control.
CLASS I DIRECTORS
Daniel M. Tabas is the Chairman of the Board and a Director of the
corporation. Mr. Tabas is also an entrepreneur with ownership interests in
Daniel M. Tabas Enterprises, Rome Enterprises, Tabas Family Partnership, Acorn
Iron, Inc., Acorn Iron & Steel, Stout Road, Inc., Stout Road Hotel, L.L.P.,
Tabas Brothers and Samuel Tabas Family Enterprises. He is the father of Lee E.
Tabas, Robert R Tabas and the father-in-law of Howard Wurzak and Murray Stempel,
III.
Joseph P. Campbell is the President and Chief Executive Officer of the
corporation and a Director of the corporation.
James J. McSwiggan is the Vice President, Chief Financial Officer and
Treasurer of the corporation and a Director of the corporation.
Murray Stempel, III is a Senior Vice President and Senior Lender of
Royal Bank of Pennsylvania and a Director of the corporation. Mr. Stempel is the
son-in-law of Daniel M. Tabas, and brother-in-law of Lee E. Tabas, Robert R.
Tabas and Howard Wurzak. Mr. Stempel was formerly a Director, Executive Vice
President and General Manager of Ajax Adhesives Industries, Inc.
Howard Wurzak is a Director of the corporation, and is President and CEO
of the Radisson Twelve Caesars hotel and banquet facility, Regency Palace and
Ramada Plaza Hotel and Wurzak Management Corporation. He is the son-in-law of
Daniel M. Tabas, and the brother-in-law of Lee E. Tabas, Robert R. Tabas and
Murray Stempel, III.
NOMINEES FOR CLASS II DIRECTORS
Jack R. Loew is a Director of the corporation since January, 1997, and
is the President and Treasurer of Hough/Loew Associates, a design/build
construction and development firm specializing in office, industrial and retail
properties.
Anthony J. Micale is a Director of the corporation, is President of
Micale Management Corporation and owns and operates eight McDonald's
restaurants.
Albert Ominsky is a Director of the corporation, is an attorney and
President of the law firm of Ominsky & Ominsky, P.C. in Philadelphia,
Pennsylvania.
8
10
Gregory T. Reardon is a Director of the corporation, is President of the
Reardon Group, Inc. The Reardon Group, located in Glen Mills, Pennsylvania,
comprises Weiss + Reardon & Company, P.C. (a regional public accounting firm);
Reardon Consulting, Inc. (a management consulting firm); and Valuation Advisors,
Inc. (a business appraisal firm). The Reardon Group is devoted to healthcare and
other highly regulated industries.
Robert R. Tabas is the Vice Chairman of the Board and a Director of the
corporation; and a Senior Vice President and Senior Lender of Royal Bank of
Pennsylvania. He is the son of Daniel M. Tabas, brother of Lee E. Tabas and the
brother-in-law of Howard Wurzak and Murray Stempel, III.
CLASS III DIRECTORS
Carl M . Cousins is a Director of the corporation, is the owner and
principal veterinarian of Fairmount Animal Hospital in Philadelphia,
Pennsylvania.
John M. Decker is a Senior Vice President and Senior Lender of Royal
Bank of Pennsylvania and a Director of the corporation.
Lee E. Tabas is a Director of the corporation, an adjunct professor at
Philadelphia University and an independent consultant. He is the son of Daniel
M. Tabas, the brother of Robert R. Tabas and the brother-in-law of Howard Wurzak
and Murray Stempel, III.
Edward B. Tepper is a Director of the corporation, is the Chairman of
the Philadelphia KIXX, a professional indoor soccer team, and the President of
Tepper Properties, a real estate investment company in Villanova.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The committees of the Board of Directors are the Executive Board, the
Audit Committee, and the Compensation, Stock Option and Appreciation Rights Plan
Committee. The corporation does not have a standing Nominating Committee. A
shareholder who desires to propose an individual for consideration by the Board
of Directors as a nominee for director should submit a proposal in writing to
the Secretary of the corporation in accordance with Section 10.1 of the
corporation's Bylaws. Any shareholder who intends to nominate any candidate for
election to the Board of Directors must notify the Secretary of the corporation
in writing not less than 60 days prior to the date of the annual meeting of
shareholders or not later than 7 days after the date on which notice was given
for any other meeting of shareholders called for the election of one or more
directors.
The Executive Board of the Board of Directors conducted twenty-nine
meetings in 2000. The members of the Executive Board during 2000 were Daniel M.
Tabas, Robert R. Tabas, Joseph P. Campbell, Albert Ominsky, Edward B. Tepper,
Gregory T. Reardon, Howard Wurzak, and Carl M. Cousins. The Executive Board has
authority to supervise and direct the finances and business of the corporation
between the regular meetings of the Board of Directors.
9
11
The Audit Committee met twice in 2000. The members of the Audit
Committee during 2000 were Joseph P. Campbell (ex officio), James McSwiggan (ex
officio), Jack R. Loew, Anthony J. Micale and Gregory Reardon. The Audit
Committee supervises the corporation's internal audit staff and reviews the
outside certified public accounting firm's audit and management reports, which
are conducted annually.
The Compensation Committee met three times in 2000. The members of this
committee in 2000 were Edward B. Tepper, Carl M. Cousins, Jack R. Loew and
Gregory T. Reardon. Daniel M. Tabas, Joseph P. Campbell and James J. McSwiggan
attended the meetings in an ex officio capacity. The committee reviews and
determines compensation for all officers and employees of the corporation. The
committee also has the authority to manage, administer, amend and interpret the
corporation's Employees' Stock Option and Appreciation Rights Plan and to
determine, among other things:
- The employees to whom awards shall be made under the plan;
- The type of the awards to be made and the amount, size and terms
of the awards; and
- When awards shall be granted.
The Investment Committee met eight times in 2000. The members of this
committee in 2000 were Daniel M. Tabas, Joseph P. Campbell, James J. McSwiggan,
Albert Ominsky, Anthony J. Micale, Murray Stempel, John Decker and David
Greenfield.
The Board of Directors of the corporation held twelve formal meetings
during 2000. Each director attended at least 75% of the aggregate number of
meetings of the Board of Directors and the various committees on which he or she
served.
REMUNERATION OF DIRECTORS AND OFFICERS AND OTHER TRANSACTIONS
Each member of the Board of Directors received a fee of $750 per board
meeting attended. Additionally, directors received $400 for each committee
meeting attended; however, directors who are also employees of the corporation
are not compensated for attendance at committee meetings.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The bank has established the Royal Bank Supplemental Executive
Retirement Plan for its executive officers and other key employees for the
purpose of providing supplemental income benefits to plan participants or their
survivors upon participants' retirement or post-retirement death. The bank has
established and maintains a grantor "rabbi" trust for the purpose of
accumulating funds with which to meet the bank's future obligations under the
plan. Although the trust is irrevocable and assets contributed to the trust can
only be used to pay such benefits with certain exceptions, the benefits under
the plan remain obligations of the bank. The bank has purchased company-owned
life insurance policies for its benefit on the lives of certain participants
estimated to be sufficient to recover, over time, the cost of benefits provided
plus the cost of insurance. Estimated annual benefits payable upon retirement to
participants are intended to provide participants a single life annuity with 120
months certain, commencing at normal retirement age 60, at the rate of up to a
maximum of 50% for each Group 1 participant's final average recognized
compensation (averaged
10
12
over the three consecutive years which produce the highest average), not to
exceed $150,000; at the rate of up to a maximum of 35% of each Group 2
participant's final average recognized compensation (averaged over the 3
consecutive years that produce the highest average), not to exceed $50,000; and
at the rate of up to a maximum of 20% of each Group 3 participant's final
average recognized compensation (averaged over the three consecutive years which
produce the highest average), not to exceed $20,000.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ESTIMATED MAXIMUM ANNUAL BENEFITS AT AGE 60
FINAL AVERAGE SALARY GROUP 1 GROUP 2 GROUP 3
- -------------------- ------- ------- -------
(FAS) PARTICIPANTS PARTICIPANTS PARTICIPANTS
----- ------------ ------------ ------------
$ 75,000 $ 37,500 $26,500 $15,000
$100,000 $ 50,000 $35,000 $20,000
$125,000 $ 62,500 $43,750 $20,000
$150,000 $ 75,000 $50,000 $20,000
$175,000 $ 87,500 $50,000 $20,000
$200,000 $ 100,000 $50,000 $20,000
$247,000 $ 123,500 $50,000 $20,000
$347,000 $ 150,000 $50,000 $20,000
EMPLOYEE OPTIONS/SAR GRANTS IN FISCAL YEAR 2000
POTENTIAL REALIZED
VALUE AT
ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED (#)(1) IN FISCAL YEARS ($/SH) DATE 5% 10%
- --------------------------------------------------------------------------------------------------------------
Daniel M. Tabas 7,875 15.039% 14.260 4/20/10 53,617.05 128,422.16
Joseph P. Campbell 7,875 15.039% 14.260 4/20/10 53,617.05 128,422.16
James J. McSwiggan 3,229 6.166% 14.260 4/20/10 21,984.69 52,657.16
Richard S. Hannye 2,370 4.526% 14.260 4/20/10 16,136.18 38,648.96
Robert R. Tabas 2,553 4.875% 14.260 4/20/10 17,382.14 41,633.24
- ---------------
(1) Pursuant to the employee stock option plan, the options are exercisable at
20% per year after the date of grant and must be exercised within ten years of
the grant (April 19, 2000).
11
13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND 2000 OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF
OPTIONS/SARS UNEXERCISED IN-THE MONEY
SHARES AT OPTIONS/SARS AT
ACQUIRED DECEMBER 31, 2000 DECEMBER 31, 2000(1)
ON VALUE ------------------------------- ------------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE(#) UNEXERCISABLE EXERCISABLE($) UNEXERCISABLE($)
- ---------------- ---------- --------------------------------------------- ------------------------------------
Daniel M. Tabas 39,782 636,711 110,045 29,193 1,603,316 87,759
Joseph P. Campbell 784 6,236 23,123 15,562 317,500 23,971
James J. McSwiggan 784 6,236 18,747 9,122 262,449 18,346
Richard S. Hannye 7,215 112,057 2,463 5,767 10,107 5,565
Robert R. Tabas 3,949 61,411 30,754 2,679 489,011 17,115
- ---------------
(1) Value of unexercised options/SARS is based upon the closing stock price at
December 31, 2000.
During 2000, no present or former officer or employee of the corporation
or its subsidiary, and no individual who had a relationship with the corporation
requiring disclosure under Item 404 of Regulation S-K, participated in
deliberations of the Compensation Committee concerning executive officer
compensation. Joseph P. Campbell, James J. McSwiggan and Daniel M. Tabas
attended the meetings in an ex-officio capacity, but did not vote.
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid by the corporation
to the Chief Executive Officer and each of the four most highly compensated
non-CEO executive officers whose total annual salary and bonus exceeded $100,000
in 2000, for services rendered during the past three fiscal years.
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($)(2) ($) ($) SARS(#) ($)(1)
- ----------------------------------------------------------------------------------------------------------------
Daniel M. Tabas 2000 338,733 301,886 46,250 - - 7,875 2,550
Chairman of the Board 1999 328,680 172,655 32,000 - - 8,190 2,550
1998 324,007 130,413 32,000 - - 7,800 2,550
Joseph P. Campbell 2000 247,200 229,443 9,000 - - 7,875 2,550
President and CEO 1999 199,385 117,000 6,000 - - 3,655 2,550
1998 162,213 37,309 6,000 - - 3,439 2,550
James J. McSwiggan 2000 153,476 100,629 9,000 - - 3,229 2,550
Treasurer and CFO 1999 135,800 44,702 3,000 2,802 2,550
1998 124,375 28,606 - - - - 1,870 2,550
Richard S. Hannye 2000 169,029 - - 1,000 - - 2,370 2,550
Secretary
General Counsel and 1999 164,013 - - 850 - - 2,429 2,550
1998 161,681 - - 1,020 - - 1,621 2,550
Robert R. Tabas 2000 121,363 68,427 9,000 - - 2,553 2,550
Vice Chairman of the Board 1999 117,761 35,348 6,000 - - 3,206 2,550
1998 116,012 26,699 6,000 - - 1,745 2,550
12
14
- --------------------------------------------------------------------------------
(1) Consists of the Bank's contribution to its Employee 401(k) Pension Plan,
under which the Board of Directors has an obligation to match 100% of the total
employee contributions up to an annual maximum of $2,550. The Plan is
administered by Flanagan Financial Group, Inc. Each employee participant is
entitled to contribute up to 15% of his gross salary. Senior management
executives are asked to refrain from contributing to the plan in the event the
administrator determines their contributions would make the Plan top heavy. Each
participant in the Plan will have credited to his Participant's Benefit Account
his proportionate share of all appropriate amounts. Future benefits are based on
future contributions.
(2) Bonuses of Daniel Tabas, Robert Tabas, Joseph Campbell and James McSwiggan
are performance based and tied to goals set by the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of Royal Bancshares of Pennsylvania, Inc. is
responsible for the governance of the corporation and its subsidiaries. In
fulfilling its fiduciary duties, the Board of Directors acts in the best
interests of the corporation's shareholders, customers and the communities
served by the corporation and its subsidiaries. To accomplish the strategic
goals and objectives of the corporation, the Board of Directors engages
competent persons to accomplish these objectives with integrity and in a cost-
effective manner. The compensation of these individuals is part of the Board of
Directors' fulfillment of its duties to accomplish the corporation's strategic
mission. The corporation provides compensation to its employees.
The fundamental philosophy of the corporation's and the Bank's
compensation program is to offer competitive compensation opportunities for all
employees based on the individual's contribution and personal performance. The
compensation program is administered by a committee comprised of outside
directors. The objectives of the compensation committee are to establish a fair
compensation policy to govern executive officers' base salaries and incentive
plans, to attract and motivate competent, dedicated, and ambitious managers
whose efforts will enhance the products and services of the corporation, the
results of which will be improved profitability, increased dividends to the
corporation shareholders and subsequent appreciation in the market of the
corporation's shares.
EXECUTIVE OFFICERS COMPENSATION
The Chief Executive Officer's compensation consists of a base salary, a
bonus and perquisites. The Committee increased Mr. Campbell's base compensation
to $247,200 and awarded Mr. Campbell a bonus in the amount of $229,443 in light
of the corporation's 2000 performance accomplishments. For 2000, the CEO bonus
was directly tied to specific performance goals, some of which are listed below.
The CEO's 2000 compensation was based on the Committee's subjective
determination after a review of all information, including the below, that it
deems relevant. Future methods of determining CEO compensation may differ.
Consolidated earnings for the twelve months ended December 31, 2000,
were $14,260,064, as compared to $12,104,528 for the same period ended in 1999.
Consolidated basic earnings per share for the year ended, December 31, 2000,
were $1.34 versus $1.15 for the same period in 1999. Consolidated assets were
$630,080,898 at December 31, 2000, as compared to $522,536,047 at December 31,
1999. Net loans and mortgages increased to $411,972,945 at December 31, 2000, as
compared to $343,080,899 at December 31, 1999. Total investment securities
increased to $156,253,421 at December 31, 2000, as compared to $142,549,941 at
December 31, 1999. Total deposits at December 31, 2000, increased to
$472,581,953 compared to $381,286,018 at December 31, 1999.
13
15
The Committee increased the aggregate base compensation of the four most
highly compensated non-CEO executives by 4.87% to 2000 aggregate compensation of
$782,601. The Committee also awarded bonuses to the four most highly compensated
non-CEO executive officers in the aggregate amount of $470,942.
For 2000, the executive officers' bonus was directly tied to specific
performance goals, some of which are listed above. The increase in the executive
officers base salary and prerequisites in 2000, were based on the committee's
subjective determination after a review of all information, including the above,
that it deems relevant. Future methods of determining executive officer
compensation may differ.
Total compensation opportunities available to the employees of the
corporation are influenced by general labor market conditions, the specific
responsibilities of the individual, and the individual's contributions to the
corporation's success. Individuals are reviewed annually on a calendar year
basis. The corporation strives to offer compensation that is competitive with
that offered employees of comparable size in our industry. Through these
compensation policies, the corporation strives to meet its strategic goals and
objectives to its constituencies and provide compensation that is fair and
meaningful to its employees.
COMPENSATION COMMITTEE
Edward B. Tepper Daniel M. Tabas (ex officio)
Carl M. Cousins, D.V.M. Joseph P. Campbell (ex officio)
Jack R. Loew, Chairman James J. McSwiggan (ex officio)
Gregory Reardon
THE AUDIT COMMITTEE
The Board of Directors maintains an Audit Committee. The membership of
this committee consists of the following outside Directors: Edward Tepper,
Anthony Micale, Jack Loew and Greg Reardon (chairman). The Audit Committee
arranges examinations by the corporation's independent certified public
accountant, reviews and evaluates the recommendations of the examinations,
receives all reports of examination of the corporation and the Bank by
regulatory agencies, analyzes such reports and reports the results of its
analysis of the regulatory reports to the corporation's Board. The committee
also receives reports directly from the corporation's internal audit department
on a quarterly basis, and recommends any action to be taken. The Audit Committee
met 2 times in 2000. In 2001, the Audit Committee will meet 4 times.
THE AUDIT COMMITTEE REPORT:
The Audit Committee meets periodically to consider the adequacy of the
corporation's financial controls and the objectivity of its financial reporting.
The Audit Committee meets with the corporation's
14
16
independent internal auditor and external auditors, both of which have
unrestricted access to the Audit Committee.
The Audit Committee Directors meet the independence requirement for
purposes of the NASD listing standards. On July 19, 2000, the Board adopted a
written charter for the Audit Committee setting forth the audit related
functions the Audit Committee is to perform. A copy of the Audit Charter is
attached as Exhibit A to this proxy statement.
In connection with this year's financial statements, the Audit Committee
has reviewed and discussed the corporation's audited financial statements with
the corporation's officers and Grant Thornton, LLP. The committee discussed,
with Grant Thornton, L.P., the matters required to be discussed by Statement on
Auditing Standards 61 ( Communication with Audit Committees). The committee also
received the written disclosures and letters from Grant Thornton, L.P. required
by Independent Standards Board Standard No. 1 (Independent Discussions with
Audit Committees ), and discussed with representatives of Grant Thornton their
independence.
Based on these reviews and discussions, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included in
the corporation's Annual Report on form 10-K for the fiscal year 2000 for filing
with the SEC.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee selected Grant Thornton, L.P. as the corporation's
principal independent certified public accountant for 2000. Representatives of
Grant Thornton, L.P. will attend the corporation's Annual Meeting of
Shareholders, will have the opportunity to make a statement if they desire to do
so, and will be expected to be available to respond to appropriate questions.
AUDIT FEES
The aggregate fees billed by Grant Thornton, L.P. for the audit of the
corporation's 2000 financial statement and review of the financial statements
included in the corporation's forms 10-Q for the year 2000 were $80,700.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES.
Grant Thornton, L.P. did not perform any such services for the
corporation.
ALL OTHER FEES
The aggregate fees billed by Grant Thornton, L.P. for all other
professional services rendered to the corporation during 2000, other than those
disclosed above, were $29,046.
AMENDMENT OF STOCK OPTION AND APPRECIATION RIGHTS PLAN
On March 21, 2001, the corporations's Board of Directors amended the
Royal Bancshares of
15
17
Pennsylvania, Inc. Stock Option and Appreciation Rights Plan to increase the
number of shares available for awards under the plan. The Board is submitting
this amendment to shareholders for approval.
The plan was initially approved by the shareholders on June 20, 1990,
and re-approved on June 29, 1995, following the formation of the corporation. It
provides for awards of stock options to officers and other key employees of the
corporation and its subsidiaries.
The following summary describes briefly the principal features of the
plan, including the change in the plan being submitted to shareholders for
approval. The summary is subject to the text of the plan, included in this proxy
statement as Exhibit "B".
Purpose. The purpose of the plan is to further the long-term growth of
the corporation by offering incentive compensation related to long-term
performance goals of those officers and other key employees who will be
responsible for planning for and directing such growth. The plan is also
intended to be a means of reinforcing the commonality of interest between the
corporation and its officers and key employees and to be an aid in attracting
and retaining officers and other key employees of outstanding abilities and
specialized skills. The corporation hopes to achieve these purposes through the
grant of options to purchase shares of the corporation's Class A common stock
and the grant of stock appreciation rights.
Administration. The plan is administered by the Compensation Committee
of the Board of Directors. Subject to the terms and conditions of the plan, the
Committee has full and final authority in its discretion to:
- Interpret the provisions of the plan;
- Decide all questions of fact arising in its application;
- Determine the employees to whom awards shall be made under the
plan;
- Determine the type of awards to made and the amount size and
terms of each such award;
- Determine the time when awards shall be granted;
Stock Subject to the Plan. Under the original plan, one million shares
of the corporation's common stock were available for awards under the plan. The
Compensation Committee anticipates that the plan will not have any remaining
shares available for awards after 2001. Therefore, the Board has increased the
number of shares reserved to 1.5 million, a 500,000 increase if the amendment is
approved by shareholders. The amendment of the plan should assure that
sufficient shares are available for issuance to maintain the plan. As of January
1, 2000, there are 375,778 unexercised options outstanding adjusted for stock
splits and stock dividends. If any award under the plan for any reason expires,
is forfeited or terminated, the common stock covered by the award becomes
available for future awards. Shares issued under the plan may be either
authorized and unissued shares or treasury shares, or partly each.
Eligibility to Receive Awards. Persons eligible to receive awards under
the plan are limited to those officers and other key employees of the
corporation who are in positions in which their decisions,
16
18
actions and counsel will have significant impact upon the profitability and the
success of the corporation. No non-employee director is eligible to participate
in the plan. Approximately 98 persons are currently considered eligible to
participate in the plan.
Form of Awards. Awards may be made from time to time by the Compensation
Committee in the form of stock options to purchase a number of shares of stock
of the corporation and an equal number of stock appreciation rights. The plan
provides for awards of non-qualified stock options ("NQSOs").
Option Price. The purchase price of stock subject to a stock option
shall be the fair market value at the time of the grant. Fair market value is
the average of the high and low prices on the closest day on which trading
occurred prior to the grant date.
Exercise Term. Not more than twenty percent (20%) of a stock option
shall be exercisable for each year of satisfactory employment completed after
the award of the stock option. Further, no stock option shall be exercised after
ten (10) years from the date of the grant thereof.
Payment for Shares. The purchase price of the shares of stock with
respect to which a stock option is exercised shall be payable in cash in full at
the time of exercise.
Rights Upon Termination of Employment. Generally, upon optionee's
termination of employment, the unexercised portion of any option will expire.
However, if the optionee's employment ends because of retirement at age sixty or
later, disability or death, the outstanding options may be exercised for three
months after termination of employment. If the corporation discharges an
optionee for "cause", the unexercised portion of any option expires immediately.
Non-Transferability. Stock options are not transferable except to
optionee's estate in the event of death or trustee in the event of disability.
Stock Splits and Dividends. If there is a stock split, stock dividend or
similar event, the number of shares covered by, and the exercise price of, each
option is appropriately adjusted.
Stock Appreciation Rights. The stock appreciation right entitles the
optionee to receive upon exercise of an option all, or a portion, of the excess
of 1) the fair market value of a specified number of shares of stock at the time
of exercise over; 2) a specified price which shall not be less than 100% of the
fair market value, of the specified number of shares of stock at the time the
right is granted. However, the amount an employee is entitled to receive upon
exercise of stock appreciation rights is limited to 1) the amount due the
corporation for the corresponding stock option exercise, plus 2) the amount of
federal tax due under the transaction.
Coordination of Stock Appreciation Right with Stock Option. A stock
appreciation right is granted only in connection with a contemporaneously
granted stock option for an identical number of shares of stock for which the
stock option has been granted. The stock appreciation right must be exercised
for the identical number of shares to be purchased by the optionee through the
exercise of a stock option.
17
19
Tax Withholding. An optionee exercising an option may be required to
remit to the corporation an amount sufficient to satisfy any federal, state, or
local withholding tax requirements prior to delivery of any shares.
Option Agreement. Each option is subject to such other terms and
conditions as may be determined by the Committee, in its discretion. These terms
and conditions are set forth in a written agreement with each optionee.
Federal Income Tax Consequences. The following is a brief summary of the
principal federal income tax consequences relating to stock options.
The grant of a NQSO does not result in taxable income to the optionee or
a tax deduction for the corporation.
Upon exercise of a NQSO, the optionee will recognize ordinary income
equal to the difference between the exercise price and the fair market value of
the shares on the date of exercise. The corporation, generally, is entitled to a
corresponding federal income tax deduction.
Upon the sale of shares acquired by exercise of a NQSO, the optionee
will have a capital gain or loss equal to the difference between the amount
realized upon the sale and the tax basis of the shares. Generally, the tax basis
is the amount paid for the shares plus the amount treated as ordinary income at
the time the option was exercised. The capital gain or loss will be long-term or
short-term depending upon the length of time the shares were held.
Future Plan Benefits. It is not possible, at this time, to determine who
may be selected to receive awards under the plan or the number of shares that
may be covered by an award to any person. As in the past, the Committee will
make this determination in its discretion, after considering the duties,
responsibilities, and present and potential contributions of eligible persons to
the corporation's success. In 2000, the Committee granted officers and other key
employees of the corporation stock options for a total of 48,871 shares.
Information on stock options held by the corporation's five most senior
executive officers is provided in this proxy statement under "Executive
Compensation - - Stock Options". Like all other persons eligible for future plan
awards, these officers have an interest in shareholder approval of the plan
amendment.
2000 PLAN BENEFITS
EMPLOYEE STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
NAME AND POSITION DOLLAR VALUE ($) (1) NUMBER OF OPTIONS
Daniel M. Tabas $ (6,332) 7,875
Chairman of the Board
Joseph P. Campbell $ (6,332) 7,875
President and CEO
18
20
James J. McSwiggan $ (2,596) 3,229
Vice President, CFO,
Treasurer
Richard S. Hannye $ (1,905) 2,370
General Counsel and
Secretary
Robert R. Tabas $ (2,053) 2,553
Vice Chairman of the Board
Executive Group $(22,162) 27,565
Non-executive Director Group - --
Non-executive Officer Group $ (10,230) 12,724
All Other Employees $ (9,709) 12,076
(1) Based on $13.452 closing price on December 31, 2000, and the strike price of
$14.256
The Board of Directors recommends a vote "FOR" approval of the amendment
to the Stock Option Plan.
The affirmative vote of a majority of the votes cast by all shareholders
entitled to vote at the meeting is required to approve the amendment.
AMENDMENT OF OUTSIDE DIRECTORS' STOCK OPTION PLAN
On March 21, 2001, the corporations's Board of Directors amended the
Royal Bancshares of Pennsylvania, Inc. Outside Directors' Stock Option Plan to
increase the number of shares available for awards under the plan. The Board is
submitting this amendment to shareholders for approval.
The plan was initially approved by the shareholders on June 20, 1990,
and re-approved on June 29, 1995, following the formation of the corporation. It
provides for awards of stock options to non- officer directors of the
corporation and its subsidiaries.
The following summary describes briefly the principal features of the
plan, including the change in the plan being submitted to shareholders for
approval. The summary is subject to the text of the plan, included in this proxy
statement as Exhibit "C".
Purpose. The purpose of the Outside Directors' Stock Option Plan is to
advance the interests of the corporation by providing incentives to attract,
retain and motivate the non-employee members of the Board of Directors of the
corporation. The corporation hopes to achieve these purposes through the grant
of options to purchase shares of the corporation's Class A common stock.
Administration. The plan is administered by the Board of Directors. The
Board shall have full and final authority in its discretion:
19
21
- To interpret the provisions of the plan;
- To decide all questions of fact arising in its application;
- To make all other determinations necessary or advisable for the
administration of the plan.
Stock Subject to the Plan. Under the original plan, the maximum number
of shares of stock that could be optioned or sold under the plan was 150,000
shares. The Board has increased the shares reserved for issuance under the plan
to 250,000 shares, an increase of 100,000 shares if the amendment if approved by
shareholders. This amendment should insure that sufficient shares are available
for issuance to maintain the plan as an effective management tool.
Eligibility to Receive Awards. The persons eligible to receive awards
under the plan shall be limited to outside directors. Directors of the
corporation who are officers or employees of the corporation or any of its
subsidiaries shall not be eligible to participate in this plan.
Amount of Awards. Each year, each outside director who has been elected,
re-elected or is continuing as a member of the board as of the adjournment of
the annual meeting, shall automatically receive options for 1,500 shares of
stock.
Option Price. The purchase price of stock issued as a stock option shall
be the "fair market value" at the time of grant. The "fair market value" shall
be the average of the high and low sales prices reported in the NASDAQ National
Market for shares of stock traded on the date of the grant or the last preceding
date on which any sales took place.
Exercise Term. Director's stock options may be exercised only after the
outside director has served a one-year term as a member of the board after the
date on which the option was granted. At that time, 100% of the total number of
shares of stock covered by the option shall become exercisable. However, no
stock option shall be exercised after 10 years from the date of the grant.
Payment for Shares. The purchase price of the shares of stock with
respect to which a stock option is exercised shall be payable in cash, in full,
at the time of exercise.
Rights upon Termination of Board Membership. In the event that a
director optionee ceases to be a member of the board of directors of the
corporation for any cause other than retirement, death or disability, the
remaining portion of the director optionees unexercised stock options shall
terminate one year after the date of termination as a board member. In the event
that a director optionee retires, dies or becomes disabled prior to the
expiration of the director's stock option and without having fully exercised the
director's stock option, to the extent that the stock option is exercisable at
the time of such retirement, death or disability, the director or the director's
attorney-in-fact, personal representative, heirs or next of kin shall have the
right to exercise the stock option during its term within a period of three
years after the termination of board membership due to retirement, death or
disability.
Non-Transferability. Directors' stock options are not transferable
except to the director optionee's estate in the event of death or trustee in the
event of disability.
20
22
Stock Splits and Stock Dividends. If there is a stock split, stock
dividend or similar event, the number of shares covered by, and the exercise
price, of each director option is proportionally adjusted.
Tax Withholding. A director optionee exercising an option may be
required to remit to the corporation an amount sufficient to satisfy any
federal, state, or local withholding tax requirements prior to delivery of any
shares.
Federal Income Tax Consequences. The following is a brief summary of the
principal federal income tax consequences relating to stock options.
The grant of a NQSO does not result in taxable income to the optionee or
a tax deduction for the corporation.
Upon exercise of NQSO, the director optionee will recognize ordinary
income equal to the difference between the exercise price and the fair market
value of the shares on the date of exercise. The corporation, generally, is
entitled to a corresponding federal income tax deduction.
Upon the sale of shares acquired by exercise of a NQSO, the director
optionee will have a capital gain or loss equal to the difference between the
amount realized upon the sale and the tax basis of the shares. Generally, the
tax basis is the amount paid for the shares plus the amount treated as ordinary
income at the time the option was exercised. The capital gain or loss will be
long-term or short-term depending upon the length of time the shares were held.
Future Plan Benefits. In 2000, the Committee granted non-officer
directors of the corporation stock options for a total of 12,600 shares. Like
all other persons eligible for future plan awards, non- officer directors have
an interest in shareholder approval of the plan amendment.
2000 PLAN BENEFITS
OUTSIDE DIRECTOR STOCK OPTION PLAN
DIRECTOR NAME DOLLAR NUMBER OF
VALUE ($) (1) OPTIONS
Daniel M. Tabas - --
Joseph P. Campbell - --
Carl Cousins $ (1,266) 1,575
John M. Decker - -
Jack Loew $ (1,266) 1,575
James J. McSwiggan - -
Anthony Micale $ (1,266) 1,575
Albert Ominsky $ (1,266) 1,575
21
23
Gregory Reardon $ (1,266) 1,575
Murray Stempel - -
Lee E. Tabas $ (1,266) 1,575
Robert R. Tabas - -
Edward Tepper $ (1,266) 1,575
Howard Wurzak $ (1,266) 1,575
(1) Based on $13.452 closing price on December 31, 2000, and the strike price of
$14.256
The Board of Directors recommends a vote "FOR" approval of the amendment
to the Director's Stock Option Plan.
The affirmative vote of a majority of the votes cast by all shareholders
entitled to vote at the meeting is required to approve the amendment.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
In the ordinary course of business, Royal Bank of Pennsylvania, the
corporation's wholly- owned banking subsidiary, has had, and expects to have in
the future, banking transactions with directors, officers of the Bank, principal
shareholders of the corporation and their associates which involve substantially
the same terms, including interest rates, collateral and repayment terms as
those prevailing at the time for comparable transactions with others, and no
more than the normal risk of collectability or other unfavorable features.
During the three years ended December 31, 2000, no transaction of the above
nature exceeded $9,000,000 or 10 percent of the equity capital accounts of the
corporation.
The largest aggregate amount of indebtedness to the corporation and the
Bank during the year 2000, by all directors and officers of the corporation and
bank as a group, and their associates, was $13,826,348. The total of such
outstanding loans at December 31, 2000 was $13,826,348. Interest rates ranged
for fixed rates from 8.9 percent to 9.0 percent. Floating rates ranged from
prime to prime plus 2.5 points.
The corporation has had and intends to have business transactions in the
ordinary course of business with directors, officers and associates on
comparable terms as those prevailing from time to time for other non-affiliated
vendors of the corporation. During 2000, the corporation used the services of
the Radisson Twelve Caesars hotel and banquet facilities for customer, director
and employee appreciation activities. The Radisson Twelve Caesars complex is
managed by Howard Wurzak and owned by Daniel M. Tabas. The corporation also
rents a billboard for advertising purposes from the Samuel Tabas Family
Foundation, for which Daniel M. Tabas and Richard Tabas serve as Trustees.
22
24
COMMON STOCK PERFORMANCE GRAPH
The following performance graph shows cumulative investment returns to
shareholders based on the assumptions that (A) an investment of $100 was made on
December 31, 1995, in each of the following:
- Royal Bancshares of Pennsylvania, Inc. Class A common stock
- the stock of all United States companies trading on the NASDAQ
market
- common stock of the peer group of Mid-Atlantic banks with
greater than $500 million in assets (the corporation's peer
group in 2000)
- common stock of the peer group of Mid-Atlantic banks with less
than $500 million in assets (the corporation's peer group in
1999 and prior years)
and (B) all dividends were reinvested in such securities over the past five
years.
[ROYAL BANCSHARES OF PENNSYLVANIA, INC.]
[LINE GRAPH]
PERIOD ENDING
-----------------------------------------------------------------------------
INDEX 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ---------------------------------------------------------------------------------------------------------------------
Royal Bancshares of Pennsylvania, Inc. 100.00 128.10 283.75 209.85 226.50 225.42
NASDAQ - Total US* 100.00 123.04 150.69 212.51 394.92 237.62
Royal Bancshares 2000 Peer Group 100.00 115.87 176.04 194.57 155.08 147.50
Royal Bancshares 1999 Peer Group 100.00 125.51 197.77 184.78 160.41 155.78
* Source: CRSP, Center for Research in Security Prices. Graduate School of
Business, The University of Chicago 2001.
Used with permission. All rights reserved. crsp.com.
23
25
BENEFICIAL OWNERSHIP - COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the corporation's officers and directors, and persons who own more than
10% of the registered class of the corporation's equity securities, to file
reports of ownership and changes in ownership with the SEC. Officers, directors
and greater than 10% shareholders are required by SEC regulation to furnish the
corporation copies of all Section 16(a) forms they file.
Based solely on its review of forms received from certain reporting
persons, or written representations from reporting persons that no Forms 5 were
required for those persons, the corporation believes that during the period
January 1, 2000 through December 31, 2000, its officers and directors were in
compliance with all filing requirements applicable to them.
LEGAL PROCEEDINGS
In the opinion of the management of the corporation, there are no
proceedings pending to which the corporation and the bank are a party or to
which its property is subject, which, if determined adversely to the corporation
and the bank, would be material in relation to the corporation's and the bank's
financial condition. There are no proceedings pending other than litigation
incident to the business of the corporation and the bank. In addition, no
material proceedings are pending or are known to be threatened or contemplated
against the corporation or the bank by government authorities.
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the provisions of
the proxy rules of the SEC, wishes to submit a proposal for inclusion in the
corporation's proxy statement for its 2002 Annual Meeting of Shareholders must
deliver the proposal in writing to the Secretary of Royal Bancshares of
Pennsylvania, Inc. at its principal executive offices, 732 Montgomery Avenue,
Narberth, Pennsylvania 19072, not later than Friday December 28, 2001.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the accompanying Notice of
Annual Meeting of Shareholders, but if any matters are properly presented, it is
the proxyholders intent to vote on such matters in accordance with their best
judgment.
24
26
ADDITIONAL INFORMATION
WE ENCLOSE A COPY OF THE CORPORATION'S 2000 ANNUAL REPORT TO SHAREHOLDERS.
UPON WRITTEN REQUEST OF ANY SHAREHOLDER, WE WILL PROVIDE A COPY OF THE
CORPORATION'S REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31, 2000,
INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, AS REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 13a-1 UNDER
THE SECURITIES AND EXCHANGE ACT OF 1934. REQUESTS SHOULD BE ADDRESSED TO JAMES
J. MCSWIGGAN, TREASURER AND CFO, ROYAL BANCSHARES OF PENNSYLVANIA, INC., 732
MONTGOMERY AVENUE, NARBERTH, PENNSYLVANIA 19072.
25
27
EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS OF ROYAL BANCSHARES OF PENNSYLVANIA, INC.
The Board of Directors (the "Board") of Royal Bancshares of
Pennsylvania, Inc. (the "Corporation") has determined that the Audit Committee
of the Board shall assist the Board in fulfilling certain of the Board's
oversight responsibilities. The Board hereby adopts this charter to establish
the governing principles of the Audit Committee.
I. ROLE OF THE AUDIT COMMITTEE
The role of the Audit Committee is to act on behalf of the Board in
fulfilling the following responsibilities of the Board:
A. To oversee all material aspects of the Corporation's reporting,
control and audit functions, except those that are specifically
related to the responsibilities of another committee of the Board;
B. To monitor the independence and performance of the Corporation's
independent accountants; and
C. To provide a means for open communication among the Corporation's
independent accountants, financial and senior management, the
internal audit department and the Board.
While the Audit Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Corporation's financial statements are
complete and accurate or are in accordance with generally accepted accounting
principles. The responsibility to plan and conduct audits is that of the
Corporation's independent accountants. The Corporation's management has the
responsibility to determine that the Corporation's financial statements are
complete and accurate and in accordance with generally accepted accounting
principles. Nor is it the duty of the Audit Committee to assure the
Corporation's compliance with laws and regulations or compliance with the
Corporation's code of ethical conduct. The primary responsibility for these
matters also rests with the Corporation's management.
II. COMPOSITION OF THE AUDIT COMMITTEE
A. The Board shall designate the members of the Audit Committee at the
Board's annual organizational meeting and the members shall serve
until the next such meeting or until their successors are designated
by the Board.
B. The Audit Committee shall consist of at least three members, but not
more than six members, who are free of any relationship that, in the
opinion of the Board, would interfere with their exercise of
independent judgment as committee members. Committee members shall
have a basic understanding of finance and accounting and shall be
able to read and understand financial statements. One member of the
Committee shall have accounting or related financial management
experience. In addition, the members of the Audit Committee shall
meet the requirements of the rules of the principal market or
transaction reporting system on which the Corporation's securities
are traded or quoted (i.e., the Nasdaq Stock Market).
28
III. MEETINGS OF THE AUDIT COMMITTEE
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances may require. The Chair of the Audit Committee shall
be responsible for meeting with the independent accountants at their request to
discuss the interim financial statements.
IV. RESPONSIBILITIES OF THE AUDIT COMMITTEE
The Audit Committee shall have the responsibility with respect to:
A. The Corporation's Risks and Control Environment:
- To discuss with the Corporation's management, independent
accountants and internal audit department the integrity of
the Corporation's financial reporting processes and
controls, particularly the controls in areas representing
significant financial and business risks;
- To review and update periodically a code of ethical
conduct and review the Corporations' procedures to enforce
compliance with the code; and
- To investigate any matter brought to its attention within
the scope of its duties.
B. The Corporation's Independent Accountants:
- To have a relationship with the independent accountants
because of the ultimate responsibility of the independent
accountants to the Board and the Audit Committee, as
representatives of the shareholders; and
- To evaluate annually the effectiveness and objectivity of
the Corporation's independent accountants and recommend to
the Board the engagement or replacement of the independent
accountants;
- To ensure that the Audit Committee receives annually from
the Corporation's independent accountants the information
about all of the relationships between the independent
accountants and the Corporation that the independent
accountants are required to provide to the Audit
Committee, to actively engage in a dialogue with the
independent accountants about any relationship between the
independent accountants and the Corporation or any
services that the independent accountants provide or
propose to provide that may impact upon the objectivity
and independence of the independent accountants and to
take, or recommend that the Board take, any appropriate
action to oversee the independence of the independent
accountants;
- To review with management the fees and other compensation
paid to the independent accounts.
C. The Corporation's Financial Reporting Process:
- To oversee the Corporation's selection of and major
changes to its accounting policies;
- To meet with the Corporation's independent accountants
and financial management both to discuss the proposed
scope of the audit and to discuss the
2
29
conclusions of the audit, including any items that the
independent accountants are required by generally accepted
auditing standards to discuss with the Audit Committee,
such as, any significant changes to the Company's
accounting policies, the integrity of the Corporations'
financial reporting process and any proposed changes or
improvements in financial, accounting or auditing
practices;
- To discuss with the Corporation's financial management and
independent accountants the Corporations' annual results
and, when appropriate, the interim results before they are
made public;
- To review and discuss with the Corporation's financial
management and independent accountants the Corporation's
audited financial statements and, when appropriate, the
Corporation's interim financial statements, before they
are made public; and
- To issue for public disclosure by the Corporation the
report required by the rules of the Securities and
Exchange Commission.
D. The Corporation's Internal Audit Process:
- To review, assess and approve the charter for the internal
audit department;
- To review the annual internal audit plan of, and any
special projects to be undertaken by, the internal audit
department;
- To discuss with the internal audit department any changes
to, and the implementation of, the internal audit plan and
any special projects and discuss with the internal audit
department the results of the internal audits and any
special projects; and
- To oversee the activities, organizational structure and
qualifications of the internal audit department.
E. Other Matters:
- To review and reassess the adequacy of this charter on an
annual basis;
- To review reports and any financial information submitted
by the Corporation to a government body or the public;
- To report to the Board the matters discussed at each
meeting of the Audit Committee;
- To keep an open line of communication with the financial
and senior management, the internal audit department, the
independent accountants and the Board; and
- To retain, at the Corporation's expense, special legal,
accounting or other consultants or experts it deems
necessary in the performance of its duties.
3
30
EXHIBIT B
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
FIRST AMENDED STOCK OPTION AND APPRECIATION RIGHT PLAN
31
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
STOCK OPTION AND APPRECIATION RIGHT PLAN
Table of contents
Section Page #
------- ------
1. Purpose........................................... 1
2. Definitions....................................... 1
3. Administration.................................... 3
4. Stock Subject to the Plan......................... 3
5. Eligibility to Receive Awards..................... 4
6. Form of Awards.................................... 4
7. Stock Options..................................... 4
8. Stock Appreciation Right.......................... 7
9. General Restrictions.............................. 10
10 Single or Multiple Agreements..................... 11
11. Rights of a Shareholder........................... 11
12. Termination of Employment......................... 12
13. Rights in Event of Death or Disability............ 13
14. Withholding....................................... 13
15. Non-Assignability................................. 13
16. Non-Uniform Determinations........................ 14
17. Participants Not Obligated........................ 14
18. Effect of Changes in Stock Subject to the Plan.... 14
19. Reservation of Shares of Stock.................... 15
20. Amendment......................................... 16
21. Effect on Other Plans............................. 16
22. Effective Date and Duration of the Plan........... 17
32
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
STOCK OPTION AND APPRECIATION RIGHT PLAN
Section 1. Purpose.
1.1 The purpose of the Royal Bancshares of Pennsylvania, Inc. Stock Option
and Appreciation Right Plan (the "Plan") is to further the long term growth of
Royal Bancshares of Pennsylvania, Inc. (the "Corporation") by offering incentive
compensation related to long-term performance goals of those officers and other
key employees who will be responsible for planning for and directing such
growth. The Plan is also intended to be a means of reinforcing the commonality
of interest between the Corporation and its officers and key employee and to be
an aid in attracting and retaining officers and other key employees of
outstanding abilities and specialized skills. The Corporation hopes to achieve
these purposes through the grant of options to purchase shares of the
corporation's Class "A" Common Stock and the grant of stock appreciation rights.
Section 2. Definitions.
2.1 Unless otherwise required by the context, the following terms shall
have the meaning set forth below:
(a) "Board" shall mean the Corporation's Board of Directors.
(b) "Committee" shall mean a minimum of three individuals and a
maximum of five individuals appointed by the Board. The Board of Directors may
appoint any individual, whether or not a director, to serve as a Committee
member, provided that such individual is ineligible and has been ineligible for
a one year period prior to appointment to the Committee for selection as a
person to whom a Stock Option or Stock Appreciation Right may
33
be granted pursuant to this Plan or any other similar plan of the Board.
The Committee shall be called to "Royal Bancshares of Pennsylvania, Inc.
Stock Option and Appreciation Right Plan Committee" and shall have the
rights and duties set forth in Section 3 below.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Corporation" shall mean Royal Bancshares of Pennsylvania, Inc., a
Pennsylvania business corporation, or any subsidiary thereof that adopts
the Plan.
(e) "Option Price" shall mean the purchase price for Stock under a
Stock Option, as determined in Section 7(b) below.
(f) "Participant" shall mean an officer or other key employee of the
Corporation to whom a Stock Option or Stock Appreciation Right is granted
under the Plan.
(g) "Plan" shall mean this Royal Bancshares of Pennsylvania, Inc.
Stock Option and Appreciation Right Plan.
(h) "Stock" shall mean the Class "A" Common Stock of the Corporation,
par value $2.00.
(i) "Stock Option" shall mean a right to purchase Stock, granted
pursuant to Section 7 below.
(j) "Stock Appreciation Right" shall mean a right to receive cash
granted pursuant to Section 8 below.
(k) "Subsidiary" shall mean a subsidiary of the Corporation.
2
34
Section 3. Administration.
3.1 The Plan shall be administered by the Committee. A simple majority of
the members of the Committee shall constitute a quorum for the transaction of
business. Unless otherwise determined by the Board, the interpretation and
construction of any provision of the Plan by the Committee shall be final. No
member of the Board or the Committee shall be liable for any action or
determination made by the member in good faith. The Committee shall have full
and final authority in its discretion to interpret the provisions of the Plan;
to decide all questions of fact arising in its application; to determine the
employees to whom awards shall be made under the Plan; to determine the type of
awards to be made and the amount, size and terms of each such award; to
determine the time when awards shall be granted; and to make all other
determinations necessary or advisable for the administration of the Plan.
Section 4. Stock Subject to the Plan.
4.1 Subject to the provisions of Section 18 below and the next sentence of
this Section, the maximum number of shares of Stock that may be optioned or sold
under the Plan is one million five hundred thousand (1,500,000) shares. However,
at no time shall the maximum number of shares of Stock that may be optioned or
sold under the Plan exceed fifteen percent (15%) of the shares of Stock
outstanding. Such shares may be treasury, or authorized, by unissued, shares of
Stock. Except as otherwise provided herein, any shares subject to a Stock Option
which for any reason expires or is terminated unexercised, shall again be
available under the Plan.
3
35
Section 5. Eligibility to Receive Awards.
5.1 Persons eligible to receive awards under the Plan shall be limited to
those officers and other key employees of the Corporation who are in positions
in which their decisions, actions and counsel will have a significant impact
upon the profitability and success of the Corporation. Directors of the
Corporation who are not otherwise officers or employees of the Corporation shall
not be eligible to participate in the Plan.
Section 6. Form of Awards.
6.1 Awards may be made from time to time by the Committee in the form of
Stock Options to purchase a number of shares of Stock of the Corporation and an
equal number of Stock Appreciation Rights.
Section 7. Stock Options.
7.1 Stock Options for the purchase of Stock of the Corporation shall be
evidenced by written agreements in such form not inconsistent with the Plan as
the Committee shall approve from time to time, which agreements shall contain in
substance the following terms and conditions:
(a) Employment Agreement
The Committee may, in its discretion, include in any Stock Option granted
under the Plan a condition that the Participant shall agree to remain in the
employ of, and to render services to, the Corporation for a period of time
(specified in the agreement) following the date the Stock Option is granted. No
such agreement shall impose upon the Corporation, however, any
4
36
obligation to employ the Participant for any period of time or to maintain the
Participant's employment duties or responsibilities.
(b) Option Price.
The purchase price of Stock subject to a Stock Option shall be the fair
market value at the time of grant, as determined by the Committee.
(c) Exercise Term.
Subject to the limitations of this Section, the Committee shall determine
the period of time within which the Stock Option may be exercised. Each Stock
Option agreement shall state such period of time. However, not more than twenty
percent (20%) of a Stock Option shall be exercisable for each year of
satisfactory employment completed after the award of the Stock Option. Further,
no Stock Option shall be exercised after ten (10) years from the date of the
grant thereof.
(d) Payment for Shares.
Subject to such payment terms and conditions as may be prescribed by the
Committee for such purpose, the purchase price of the shares of Stock with
respect to which a Stock Option is exercised shall be payable in full at the
time of exercise in cash.
(e) Number of Shares.
Each Stock Option shall state the total number of shares of Stock to which
it pertains. The number of shares to which a Participant is entitled under a
Stock Option shall be reduced by the number of shares related to the Stock
Option that have been previously exercised, by the Participant. No Stock Option
may be exercised for a fractional share of Stock.
5
37
(f) Rights Upon Termination of Employment.
In the event that a Participant ceases to be an officer or key employee of
the Corporation for any cause other than retirement with the Corporation's
consent, death, or disability, the Participant's Stock Option shall terminate at
the time of termination of employment or upon the transfer to a lesser position
of employment so that the employee is no longer deemed to be a key employee. In
the event that a Participant retires with the Corporation's consent, dies, or
becomes disabled prior to the expiration of the Participant's Stock Option and
without having fully exercised the Participant's Stock Option, to the extent
that the Stock Option is exercisable at the time of such retirement with the
Corporation's consent, death, or disability, the Participant or the
Participant's successor shall have the right to exercise the Stock Option during
its term within a period of three (3) months after termination of employment due
to retirement with the Corporation's consent, death, or disability.
(g) Nontransferability.
Each Stock Option agreement shall state that the Stock Option is not
transferable other than pursuant to subsection 7(f) above by will or the laws of
descent and distribution, and that during the lifetime of the Participant, the
Stock Option is exercisable only by the Participant.
(h) Non-Qualified Stock Option.
It is not intended that this Stock Option qualify as an Incentive Stock
Option under Section 422A of the Code.
6
38
Section 8. Stock Appreciation Right.
8.1 A Stock Appreciation Right shall be evidenced by a written agreement in
such form not inconsistent with the Plan as the Committee shall approve from
time to time, which agreement shall contain in substance the following terms and
conditions:
(a) Employment Agreement.
The Committee may, in its discretion, include in any Stock Appreciation
Right granted under the Plan a condition that the Participant shall agree to
remain in the employ of, and to render services to, the Corporation for a period
of time (specified in the agreement) from the date the Stock Appreciation Right
is granted. No such agreement shall impose upon the Corporation, however, any
obligation to employ the Participant for any period of time or to maintain the
Participant's employment duties or responsibilities.
(b) Right Value.
A Stock Appreciation Right shall entitle the Participant, subject to such
terms and conditions determined by the Committee, to receive upon exercise
thereof all or a portion of the excess of (i) the fair market value, as
determined by the Committee, of a specified number of shares of Stock at the
time of exercise, over (ii) a specified price which shall not be less than one
hundred percent (100%) of the fair market value, as determined by the Committee,
of the specified number of shares of Stock at the time the right is granted, as
adjusted pursuant to Section 18 below.
7
39
(c) Coordination with Stock Option.
A Stock Appreciation Right shall be granted only in connection
with a contemporaneously granted Stock Option for an identical number
of shares of Stock for which the Stock Option has been granted. A
Stock Appreciation Right shall be exercised for the identical number
of shares to be purchased by the Participant through the exercise of a
Stock Option.
(d) Exercise Term.
Subject to the limitation of this Section, the Committee shall
determine the period of time within which the Stock Appreciation Right
may be exercised. Each Stock Appreciation Right agreement shall state
such period of time. However, not more than twenty percent (20%) of a
Stock Appreciation Right shall be exercisable for each year of
satisfactory employment completed after the award of the Stock
Appreciation Right. Further, no Stock Appreciation Right shall be
exercisable after ten (10) years from the date of the award thereof.
(e) Number of Shares.
Each Stock Appreciation Right shall state the total number of
shares of Stock to which it pertains. The number of shares to which a
Participant is entitled under a Stock Appreciation Right shall be
equal to the number of shares in the contemporaneously granted Stock
Option, (described in Section 7 above).
8
40
(f) Rights Upon Termination of Employment.
In the event that a Participant ceases to be an officer or key
employee of the Corporation for any cause other than retirement with
the Corporation's consent, death, or disability, the Participant's
Stock Appreciation Right shall terminate at the time of termination of
employment or upon the transfer to a lesser position of employment so
that the employee is no longer deemed to be a key employee. In the
event that a Participant retires with the Corporation's consent, dies,
or becomes disabled prior to the expiration of the Participant's Stock
Appreciation Right and without having fully exercised the
Participant's Stock Appreciation Right; to the extent that the Stock
Appreciation Right is exercisable at the time of such retirement with
the Corporation's consent, death, or disability by the Participant,
such Participant or such Participant's successor shall have the right
to exercise the Stock Appreciation Right during its term within a
period of three (3) months after termination of employment due to
retirement with the Corporation's consent, death or disability.
(g) Nontransferability.
Each Stock Appreciation Right agreement shall state that the
Stock Appreciation Right is not transferable other than pursuant to
subsection 8(f) above by will or the laws of descent and distribution;
and that during the lifetime of the Participant, the Stock
Appreciation Right is exercisable only by the Participant.
9
41
(h) Payment.
Upon exercise of a Stock Appreciation Right, payment shall be made in cash,
at the same time and subject to the same terms and conditions as the payment for
the matching Stock Option.
(i) Manner of Exercise.
A Participant shall exercise a Stock Appreciation Right by giving the
Corporation written notice of such exercise accompanying the Participant's
notice of the exercise of a Stock Option for an identical number of shares of
Stock. The date upon which such written notice is received by Corporation shall
be the exercise date for the stock Appreciation Right.
(j) Other Terms.
A Stock Appreciation Right shall be granted in such manner and such form,
and subject to such additional terms and conditions as the Committee, in its
sole discretion, deems necessary or desirable, including without limitation, any
form or manner in order to avoid any insider-trading liability in connection
with a Stock Appreciation Right under Section 16(b) of the Securities Exchange
Act of 1934.
Section 9. General Restrictions.
9.1 Each award under the Plan shall be subject to the requirement that if
at any time the Committee shall determine that (i) the listing, registration or
qualification of the shares of Stock upon any securities exchange or under any
state or federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the recipient of an award with
10
42
respect to the disposition of shares of Stock, is necessary or desirable as a
condition of or in connection with the granting of such award or the issuance or
purchase of shares of Stock; such award shall not be consummated in whole or in
part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee. Moreover, as a condition to the exercise of any
portion of a Stock Option, or of any Stock Appreciation Right, the Corporation
may require the person exercising such Stock Option or Stock Appreciation Right
to represent and warrant at the time of such exercise that any shares of Stock
acquired at exercise are being acquired only for investment and without any
present intention to sell or distribute such shares, if, in the opinion of the
Corporation's counsel, such a representation is required under the Securities
Act of 1933 or any other applicable law, regulation, or rule of any governmental
agency.
Section 10. Single or Multiple Agreements.
10.1 Multiple forms of awards or combinations thereof maybe evidenced by a
single agreement or multiple agreements, as determined by the Committee.
Section 11. Rights of a Shareholder.
11.1 The recipient of any award under the Plan, unless otherwise provided
by the Plan, shall have no rights as a shareholder with respect thereto unless
and until certificates for shares of Stock are issued to the recipient. Promptly
after the
11
43
exercise of a Stock Option and the payment of the full Option Price, the
Participant shall be entitled to the issuance of a stock certificate evidencing
the participant's ownership of such Stock. No adjustment will be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
Section 12. Termination of Employment.
12.1 Except as provided in this Section 12 and in Section 13 below, if a
Participant ceases to be employed by the Corporation as an officer or key
employee, the Participant's Stock Option and Stock Appreciation Right shall
terminate immediately upon such termination of employment or transfer to a
lesser position so that the employee is no longer deemed to be a key employee.
However, if a participant's cessation of employment with the Corporation is due
to the Participant's retirement with the Corporation's consent, the Participant
may, within three months after such cessation of employment, exercise the
Participant's Stock Option and Stock Appreciation Right to the extent that the
Participant is entitled to exercise them on the date of cessation of employment.
However, in no event shall any Option or Stock Appreciation Right be exercisable
more than ten (10) years from the date it was granted. If the participant
engages in employment or activities contrary, in the opinion of the Committee,
to the Corporation's best interests, the Committee may cancel an Option or Stock
Appreciation Right during the three month period referred to in this paragraph.
The Committee shall determine in each case whether a termination of
12
44
employment shall be considered a retirement with the Corporation's consent.
Unless overruled by the Board, any such determination of the Committee shall be
final and conclusive.
Section 13. Rights in Event of Death or Disability.
13.1 If a Participant dies or becomes disabled (as determined by the
Committee pursuant to Section 3 above) while employed by the Corporation, or
within three months after having retired with the Corporation's consent, and
without having fully exercised the Participant's Stock Option and Stock
Appreciation Right; the Participant, the Participant's personal representative,
the executor or administrator, or the legatee or heir of the Participant's
estate shall have the right within three (3) months thereafter to exercise such
Stock Option and Stock Appreciation Right to the extent that such disabled or
deceased Participant is entitled to exercise the Stock Option and Stock
Appreciation Right on the date of the Participant's disability or death.
However, in no event shall any stock Option or Stock Appreciation Right be
exercisable more than ten (10) years from the date it was granted.
Section 14. Withholding.
14.1 Whenever the Corporation proposes or is required to issue or transfer
shares of Stock under the Plan, the Corporation shall have the right to require
the recipient to remit to the Corporation an amount sufficient to satisfy any
federal, state or local withhold tax requirements prior to the delivery of any
certificate or certificates for such shares.
13
45
Section 15. Non-Assignability.
15.1 Except by will or by the laws of descent and distribution, no award
under the Plan shall be assignable or transferable by the recipient thereof.
Except as provided in Section 13 above, during the life of the recipient, such
award shall be exercisable only by such person or by such person's guardian or
legal representative.
Section 16. Non-Uniform Determinations.
16.1 The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive awards, the form, amount,
and timing of such awards, the terms and provisions of such awards and the
agreements evidencing same, and the establishment of values) need not be uniform
and may be made selectively among persons who receive, or are eligible to
receive, awards under the Plan, whether or not such persons are similarly
situated.
Section 17. Participants Not Obligated.
17.1 The granting of an award of a Stock Option or Stock Appreciation Right
shall impose no obligation upon the Participant to exercise such Stock Option or
Stock Appreciation Right.
Section 18. Effect of Changes in Stock Subject to the Plan.
18.1 The aggregate number of shares of Stock available for Stock Options
under the Plan, the shares subject to any Stock Option, the price per share, and
the number of Stock Appreciation Rights shall all be proportionately adjusted
for any increase or decrease in the number of issued shares of Stock subsequent
to the
14
46
effective date of the Plan resulting from (1) a subdivision or consolidation of
shares or any other capital adjustment, (2) the payment of a stock dividend, or
(3) other increase or decrease in such shares effected without receipt of
consideration by the Corporation. The aforesaid adjustment shall be made in such
a manner so that the aggregate amount payable under the Stock Option and the
Stock Appreciation Right after the increase or decrease equals the aggregate
amount payable prior to such increase or decrease. If the Corporation shall be
the surviving corporation in any merger or consolidation, any Stock Option or
Stock Appreciation Right shall pertain, apply, and relate to the securities to
which a holder of the number of shares of Stock subject to the Stock Option and
Stock Appreciation Right would have been entitled after a merger or
consolidation. Upon dissolution or liquidation of the Corporation, or upon a
merger or consolidation in which the Corporation is not the surviving
corporation, all Stock Options and Stock Appreciation Rights outstanding under
the Plan shall terminate; provided, however, that each Participant (and each
other person entitled under Section 13 above to exercise a Stock Option or Stock
Appreciation Right) shall have the right, immediately prior to such dissolution
or liquidation, or such merger or consolidation, to exercise such Participant's
Stock Option and Stock Appreciation Right, in whole or in part, to the extent
that such Stock Option and Stock Appreciation Right are otherwise exercisable
under the terms of the Plan, without regard to the twenty percent (20%)
limitation of Sub-section 5(c) above.
15
47
Section 19. Reservation of Shares of Stock.
19.1 The Corporation, during the term of this Plan, shall at all times
reserve and keep available, and shall seek or obtain from any regulatory body
having jurisdiction any requisite authority necessary to issue and to sell, the
number of shares of Stock that shall be sufficient to satisfy the requirements
of this Plan. The inability of the Corporation to obtain from any regulatory
body having jurisdiction the authority deemed necessary by the Corporation's
counsel for the lawful issuance and sale of its Stock hereunder shall relieve
the Corporation of any liability in respect of the failure to issue or sell
Stock as to which the requisite authority has not been obtained.
Section 20. Amendment.
20.1 Except as provided in the next sentence, the Corporation may terminate
or amend the Plan at any time. However, only with shareholder approval, may the
Corporation increase the maximum number of shares which may be issued under the
Plan (other than increases pursuant to Section 18 above), extend the period
during which any award may be exercised, extend the term of the Plan or change
the minimum Option Price. The termination, any modification, or amendment of the
Plan shall not, without the consent of a Participant, affect a Participant's
rights under an award preciously granted.
Section 21. Effect on Other Plans.
21.1 Participate in this Plan shall not affect an employee's eligibility to
participate in any other benefit or
16
48
incentive plan of the Corporation. Unless specifically provided, any awards made
pursuant to this Plan shall not be used in determining the benefits provided
under any other plan of the Corporation.
Section 22. Effective Date and Duration of the Plan
22.1 The Plan shall be effective from the date that the Plan is approved by
the Corporation's Board, subject to the ratification of the Board's actions by
the Shareholders and shall remain in effect until all awards under the Plan have
been satisfied by the issuance of shares of Stock or the payment of cash, but no
award shall be granted more than ten years after the earlier of the date the
Plan is adopted by the Corporation or is approved by the Corporation's
shareholders.
Adopted as of April 18, 1996 and amended as of March 21, 2001, by the Board
of Directors of Royal Bancshares of Pennsylvania, Inc.
-----------------------
Treasurer/CFO
17
49
EXHIBIT C
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
FIRST AMENDED OUTSIDE DIRECTORS' STOCK OPTION PLAN
50
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
OUTSIDE DIRECTORS' STOCK OPTION PLAN
Table of Contents
Section Page #
1. Purpose........................................... 1
2. Definitions....................................... 1
3. Administration.................................... 2
4. Stock Subject to the Plan......................... 2
5. Eligibility to Receive Awards..................... 3
6. Amount of Awards.................................. 3
7. Stock Options..................................... 3
8. General Restrictions.............................. 6
9. Single or Multiple Agreements..................... 7
10. Rights of a Shareholder........................... 7
11. Withholding....................................... 7
12. Non-Assignability................................. 7
13. Participants Not Obligated........................ 7
14. Effect of Changes in Stock Subject to the Plan.... 7
15. Reservation of Shares of Stock.................... 9
16. Amendment......................................... 9
17. Effect on Other Plans............................. 10
18. Effective Date and Duration of the Plan........... 10
19. Miscellaneous Provisions.......................... 10
51
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
OUTSIDE DIRECTORS' STOCK OPTION PLAN
Section 1. Purpose.
1.1 The purpose of the Royal Bancshares of Pennsylvania, Inc. Outside
Directors' Stock Option Plan (the "Plan") is to advance the interest of Royal
Bancshares of Pennsylvania, Inc. (the "Corporation") by providing incentives to
attract, retain, and motivate the non-employee members of the Board of Directors
of the Corporation ("Outside Directors"). The Corporation hopes to achieve these
purposes through the grant of options to purchase shares of the Corporation's
Class "A" Common Stock.
Section 2. Definitions.
2.1 Unless otherwise required by the context, the following terms shall
have the meaning set forth below:
(a) "Board" shall mean the Corporation's Board of Directors.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Corporation" shall mean Royal Bancshares of Pennsylvania, Inc., a
Pennsylvania business corporation.
(d) "Outside Director" shall mean an individual duly elected to serve as a
member of the Board and who is not an employee of the Corporation or any of its
subsidiaries.
(e) "Option Price" shall mean the purchase price for Stock under a Stock
Option, as determined in Section 7(a) below.
(f) "Participant" shall mean an Outside Director to whom a Stock Option is
granted under the Plan.
52
(g) "Plan" shall mean this Royal Bancshares of Pennsylvania, Inc. Outside
Directors' Stock Option Plan.
(h) "Stock" shall mean the Class "A" Common Stock of the Corporation, par
value $2.00.
(i) "Stock Option" shall mean a right to purchase Stock, granted pursuant
to Section 7 below.
(j) "Subsidiary" shall mean a subsidiary corporation of the Corporation, as
defined in Sections 425(f) and 425(g) of the Code. Section
3. Administration.
3.1 The Plan shall be administered by the Board. A simple majority of the
members of the Board shall constitute a quorum for the transaction of business.
Except as provided in Section 16 below, the interpretation and construction of
any provision of the Plan by the Board shall be final. No member of the Board
shall be liable for any action or determination made by the member in faith.
Except as provided in Section 16 below, the Board shall have full and final
authority in its discretion to interpret the provisions of the Plan, to decide
all questions of fact arising in its application, and to make all other
determinations necessary or advisable for the administration of the Plan. The
Board may authorize one or more directors, the Corporation's Secretary or any
other Corporation Officers to execute and deliver documents on behalf of the
Board.
2
53
Section 4. Stock Subject to the Plan.
4.1 Subject to the provisions of Section 14 below and the next sentence of
this Section, the maximum number of shares of Stock that may be optioned or sold
under the Plan is Two Hundred Fifty Thousand (250,000) shares. However, at no
time shall the maximum number of shares of Stock that may be optioned or sold
under the Plan exceed ten percent (10%) of the shares of Stock outstanding. Such
shares may be treasury, or authorized, but unissued, shares of Stock. Except as
otherwise provided herein, any shares subject to a Stock Option which for any
reason expires or is terminated unexercised, shall again be available under the
Plan.
Section 5. Eligibility to Receive Awards.
5.1 Persons eligible to receive awards under the plan shall be limited to
Outside Directors. Directors of the Corporation who are officers or employees of
the Corporation or any of its subsidiaries shall not be eligible to participate
in this Plan.
Section 6. Amount of Awards.
6.1 Each year, as of the date of the Annual Meeting of Stockholders of the
Corporation, each Outside Director who has been elected or re-elected or who is
continuing as a member of the Board as of the adjournment of the Annual Meeting
shall automatically receive an Option for 1,500 shares of Stock.
Section 7. Stock Options.
7.1 Stock Options for the purchase of Stock shall be evidenced by written
agreements in such form not inconsistent with
3
54
the Plan as the Board shall approve from time to time, which agreements shall
contain in substance the following terms and conditions:
(a) Option Price.
The purchase price of Stock subject to a Stock Option shall be the "fair
market value" at the time of grant. The "fair market value" shall be the average
of the high and low sales prices reported in the NASDAQ NATIONAL MARKET ISSUES
for shares of Stock traded on the date of the grant or the last preceding date
on which any sales took place. In the event that the shares of Stock are traded
on a stock exchange, then the reported sales prices on such exchange shall be
used in lieu of the sales prices reported in the NASDAQ NATIONAL MARKET ISSUES.
(b) Exercise Term.
Subject to the rights granted in subsection (e) below and the limitations
of the final sentence of this section, the Stock Option may be exercised only
after the Outside Director has served a one year term as a member of the Board
after the date on which the Option was granted. At that time, one hundred
percent (100%) of the total number of shares of Stock covered by the Option
shall become exercisable. However, no Stock Option shall be exercised after ten
(10) years from the date of the grant thereof.
(c) Payment for Shares.
The purchase price of the shares of Stock with respect to which a Stock
Option is exercised shall be payable in full at the time of exercise in cash.
4
55
(d) Number of Shares.
Each Stock Option shall state the total number of shares of Stock
to which it pertains. No Stock Option may be exercised for a
fractional share of Stock.
(e) Rights Upon Termination of Board Membership.
In the event that a Participant ceases to be a member of the
Board of Directors of the Corporation for any cause other than
retirement, death, or disability, subject to the limitations of the
final sentence in Subsection 7(b) above, the remaining portion of a
Participant's unexercised Stock Options shall terminate one year after
the date of termination as a Board member. In the event that a
Participant retires, dies, or becomes disabled prior to the expiration
of the Participant's Stock Option and without having fully exercised
the Participant's Stock Option, to the extent that the Stock Option is
exercisable at the time of such retirement, death or disability, the
Participant or the Participant's attorney in fact, personal
representative, heirs or next of kin shall have the right to exercise
the Stock Option during its term within a period of three (3) years
after termination of Board membership due to retirement, death, or
disability.
(f) Non-transferability.
Each Stock Option agreement shall state that the Stock Option is
not transferable other than pursuant to Subsection 7(e) above by will
or the laws of descent and distribution; and that during the lifetime
of the Participant, the Stock Option is
5
56
exercisable only by the Participant or in the event of the Participant's
disability by the Participant's attorney in fact.
(g) Non-Qualified Stock Option.
It is not intended that this Stock Option qualify as an Incentive Stock
Option under Section 422A of the Code.
Section 8. General Restrictions.
8.1 Each award under the Plan shall be subject to the requirement that if
at any time the Board shall determine that (i) the listing, registration or
qualification of the shares of Stock upon any securities exchange or under any
state or federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the recipient of an award with respect
to the disposition of shares of Stock, is necessary or desirable as a condition
of or in connection with the granting of such award or the issuance or purchase
of shares of Stock; such award shall not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Board. Moreover, as a condition to the exercise of any portion of a Stock
Option, the Corporation may require the person exercising such Stock Option to
represent and warrant at the time of such exercise that any shares of Stock
acquired at exercise are being acquired only for investment and without any
present intention to sell or distribute such shares, if, in the opinion of the
Corporation's counsel, such a representation is required under the Securities
Act of 1933 or any other applicable law, regulation, or rule of any governmental
agency.
6
57
Section 9. Single or Multiple Agreements.
9.1 Multiple forms of awards or combinations thereof may be evidenced by a
single agreement or multiple agreements, as determined by the Board.
Section 10. Rights of a Shareholder.
10.1 The recipient of any award under the Plan, unless otherwise provided
by the Plan, shall have no rights as a shareholder with respect thereto unless
and until certificates for shares of Stock are issued to the recipient. Promptly
after the exercise of a Stock Option and the payment of the full Option Price,
the Participant shall be entitled to the issuance of a stock certificate
evidencing the Participant's ownership of such Stock. No adjustment will be made
for dividends or other rights for which the record date is prior to the date
such stock certificate is issued.
Section 11. Withholding.
11.1 Whenever the Corporation proposes or is required to issue or transfer
shares of Stock under the Plan, the Corporation shall have the right to require
the recipient to remit to the Corporation an amount sufficient to satisfy any
federal, state or local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares.
Section 12. Non-Assignability.
12.1 Except by will or by the laws of descent and distribution, no award
under the Plan shall be assignable or transferable by the recipient thereof.
Except as provided in
7
58
Subsection 7(e) above, during the life of the recipient, such award shall be
exercisable only by such person or by such person's guardian or legal
representative.
Section 13. Participants Not Obligated.
13.1 The granting of an Award of a Stock Option shall impose no obligation
upon the Participant to exercise such Stock Option.
Section 14. Effect of Changes in Stock Subject to the Plan.
14.1 The aggregate number of shares of Stock available for Stock Options
under the Plan, the shares subject to any Stock Option, and the price per share,
shall all be proportionately adjusted for any increase or decrease in the number
of issued shares of Stock subsequent to the effective date of the Plan resulting
from (i) a subdivision or consolidation of shares or any other capital
adjustment, (ii) the payment of a stock dividend, or (iii) other increase or
decrease in such shares effected without receipt of consideration by the
Corporation. The aforesaid adjustment shall be made in such a manner so that the
aggregate amount payable under the Stock Option after the increase or decrease
equals the aggregate amount payable prior to such increase or decrease. If the
Corporation shall be the surviving corporation in any merger or consolidation,
any Stock Option shall pertain, apply, and relate to the securities to which a
holder of the number of shares of Stock subject to the Stock Option would have
been entitled after the merger or consolidation. Upon dissolution or liquidation
of the Corporation, or upon a merger or consolidation in which the Corporation
is not the surviving corporation, all
8
59
Stock Options outstanding under the Plan shall terminate; provided, however,
that each participant (and each other person entitled under Subsection 7(e)
above to exercise a Stock Option) shall have the right, immediately prior to
such dissolution or liquidation, or such merger or consolidation, to exercise
such Participant's Stock Option in whole to the extent that such Stock Option is
otherwise exercisable under the terms of the Plan.
Section 15. Reservation of Shares of Stock.
15.1 The Corporation, during the term of this Plan, shall at all times
reserve and keep available, and shall seek or obtain from any regulatory body
having jurisdiction any requisite authority necessary to issue and to sell, the
number of shares of Stock that shall be sufficient to satisfy the requirements
of this Plan. The inability of the Corporation to obtain from any regulatory
body having jurisdiction the authority deemed necessary by the Corporation's
counsel for the lawful issuance and sale of its Stock hereunder shall relieve
the Corporation of any liability in respect of the failure to issue or sell
Stock as to which the requisite authority has not been obtained.
Section 16. Amendment.
16.1 Except as provided in the next sentence, the Corporation may terminate
or amend the Plan at any time. However, only with shareholder approval, may the
Corporation increase the maximum number of shares of Stock which may be issued
under the plan (other than increases pursuant to Section 14 above), increase the
number of shares of Stock subject to an Option, change the class of
9
60
persons eligible to receive Options under this Plan, extend the period during
which any award may be exercised, extend the term of the Plan or change the
minimum Option Price. The termination, any modification, or amendment of the
Plan shall not, without the consent of a Participant, affect a Participant's
rights under an award previously granted.
Section 17. Effect on Other Plans.
17.1 Participation in this Plan shall not affect a Board member's
eligibility to participate in any other benefit or incentive plan of the
Corporation. Unless specifically provided, any awards made pursuant to this Plan
shall not be used in determining the benefits provided under any other plan of
the Corporation.
Section 18. Effective Date and Duration of the Plan.
18.1 The Plan shall be effective from the date that the Plan is approved by
the Corporation's Board, subject to the ratification of the Board's action by
the Corporation's shareholders and shall remain in effect until all awards under
the Plan have been satisfied by the issuance of shares of Stock or the payment
of cash, but no award shall be granted more than ten years after the earlier of
the date the Plan is adopted by the Corporation or is approved by the
Corporation's shareholder.
Section 19. Miscellaneous Provisions.
19.1 Except as expressly provided for in this Plan, no Outside Director or
any other person shall have any claim or right to be granted an Option under
this Plan. Neither this Plan nor any
10
61
action taken under this Plan shall be construed as giving any Outside Director
any right to be retained in the service of the Corporation in any capacity
whatsoever.
19.2 The expenses of this Plan shall be born by the Corporation.
19.3 This Plan shall be unfunded. The Corporation shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares of Stock upon exercise of any Option
under this Plan and issuance of Shares of Stock upon exercise of Options shall
be subordinate to the claims of the Corporation's general creditors.
19.4 By accepting any Option or other benefit under this Plan, each
Participant, any person claiming under or through such Participant shall be
conclusively deemed to have indicated acceptance and ratification of, and
consent to, any action taken under this Plan by the Corporation or the Board.
Adopted as of April 18, 1996, and amended as of March 21, 2001, by the
Board of Directors of Royal Bancshares of Pennsylvania, Inc.
------------------------------------
Chief Financial Officer & Treasurer
11
62
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
REVOCABLE PROXY
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby Constitutes and appoints Joseph P. Campbell and
Richard S. Hannye, and each or any of them, proxies of the undersigned, with
full power of substitution, to vote all of the Shares of the Class A Common
Stock and all of the Shares of the Class B Common Stock of Royal Bancshares of
Pennsylvania, Inc. that the undersigned may be entitled to vote, at the Annual
Meeting of Shareholders to be held at The Raddison Twelve Caesars hotel and
banquet facility, 4200 City Line Avenue, Philadelphia, Pennsylvania 19131, on
Wednesday, May 16, 2001, at 6 :30 p.m., prevailing time, and at any adjournment
or postponement thereof as follows:
----------------------------------------
Please be sure to sign and date Date
this Proxy in the box below.
- --------------------------------------------------------------------------------
- ----------Shareholder sign above---------Co-holder (if any) sign above----------
WITH- FOR ALL
FOR HOLD EXCEPT
1. ELECTION OF DIRECTORS. To elect five [ ] [ ] [ ]
Class II Directors to serve a term of
three-years and until their successors are
elected and qualified:
ALBERT OMINSKY, ROBERT R. TABAS, ANTHONY MICALE,
GREGORY T. REARDON AND JACK R. LOEW
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR
ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- ----------------------------------------------
FOR AGAINST ABSTAIN
2. EMPLOYEES' STOCK OPTION AND APPRECIATION [ ] [ ] [ ]
RIGHTS PLAN. To consider the issuance of
500,000 additional shares of bank stock to
the Employees' Stock Option and Appreciation
Rights Plan to be held in reserve for future
grants under the Plan.
FOR AGAINST ABSTAIN
3. DIRECTORS' STOCK OPTION PLAN. To consider [ ] [ ] [ ]
the issuance of 100,000 additional shares of
bank stock to the Directors' Stock Option
Plan to be held in reserve for future grants
under the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
LISTED ABOVE AND FOR PROPOSALS 2 AND 3.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment or
postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED ABOVE AND FOR PROPOSALS 2 AND 3.
JOSEPH P. CAMPBELL AND RICHARD S. HANNYE, THE PERSONS NAMED AS PROXIES, WILL
HAVE THE RIGHT TO VOTE CUMULATIVELY AND TO DISTRIBUTE THEIR VOTES AMONG THE
NOMINEES AS THEY CONSIDER ADVISABLE, UNLESS A SHAREHOLDER INDICATES ON HIS OR
HER PROXY HOW HE OR SHE DESIRES THE VOTES TO BE CUMULATED FOR VOTING PURPOSES.
- --------------------------------------------------------------------------------
-- DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. --
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE SIGN,
DATE AND RETURN THIS PROXY TO THE CORPORATION AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING. WHEN SIGNING
AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE. IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. IF STOCK IS HELD JOINTLY, EACH
OWNER SHOULD SIGN. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED,
AND MAY BE WITHDRAWN IF YOU ELECT TO ATTEND THE ANNUAL MEETING AND WISH TO VOTE
IN PERSON, AFTER GIVING WRITTEN NOTICE TO THE SECRETARY OF THE CORPORATION.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
- ----------------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------